Article Summary
- The continuous rate hikes embarked upon by the CBN since May 2022 have not kept the inflation rate under check.
- Inflation figures going up despite the efforts of the CBN is indicative of the fact that Nigeria’s inflation is currently driven by cost-push factors primarily.
- Nigeria’s headline inflation rate rose to 22.22% in April 2023, a 0.18% point higher than the 22.04% recorded in the previous month.
Some financial experts have urged the Federal Government to implement complementary fiscal measures to address the rising inflation in the country.
They made the call in Lagos while reacting to the April inflation figure released by the National Bureau of Statistics (NBS).
The experts noted that the monetary policy tightening stance of the Central Bank of Nigeria (CBN) alone would not address the challenge.
Need for complementary fiscal measures
A Professor of Finance and Capital market at Nasarawa State University, Uche Uwaleke, said that the continuous rate hikes embarked upon by the apex bank since May 2022 have not kept the inflation rate under check.
Uwaleke said the continuous rate hike by the CBN had not yielded the desired results because of the domestic structural factors in the country.
- “It’s worth mentioning that the NBS, in its April Consumer Price Index report, provided a clue as to the major items driving the inflationary pressure in Nigeria to include food, electricity, housing, and transport.“In light of this revelation, what becomes clear is that the monetary policy tightening stance of the CBN alone may not address the challenge,” he said.
Uwaleke urged the government to implement complementary fiscal measures aimed at boosting the food supply as well as reducing the cost of production occasioned by the high cost of energy and transport.
He noted that inflationary pressure had continued to be driven by the food index at over 24%, reflecting legacy factors such as transport challenges.
This, he said, partly explained why food inflation was reportedly highest in Kogi at over 29% and lowest in Sokoto at about 19%, a difference of about 10%.
Addressing the security challenge
Uwaleke also stressed the need for the government to tackle the intractable security challenge facing the country and invest more in mechanized agriculture to increase food output and bring down food inflation.
Prof. Ndubisi Nwokoma, Director, Centre for Economic Policy Analysis and Research (CEPAR), University of Lagos, also spoke in the same vein.
- “Inflation figures going up despite the efforts of the CBN is indicative of the fact that Nigeria’s inflation is currently driven by cost-push factors primarily. The monetary causative factors may not be that significant.
- “There have been supply chain disruptions with the cost of goods rising with some expectations of more increases in the near future, particularly with the dire fiscal sustainability challenges of the government.
- “One other cost-push factor is the high exchange rate which spirals the increase in prices.
- “The other is the lingering effect of the naira redesign and cash withdrawal limit policies of CBN which exacerbated the increase in prices, particularly for food items,” Nwokoma said.
He, however, expressed optimism that prices would moderate to some extent in the coming months with cash availability.
Nwokoma also urged the apex bank to continue with the cash squeeze by maintaining the Monetary Policy Rate at its current level of 17.5%.
He added that the CBN should stabilize the exchange rate and address the supply chain disruptions such as insecurity, energy supply deficits, and others.
What you should know
Nigeria’s headline inflation rate rose to 22.22% in April 2023, a 0.18% point higher than the 22.04% recorded in the previous month.
According to the latest Consumer Price Index (CPI), report by the National Bureau of Statistics (NBS), Nigeria’s inflation rate has increased for the fourth consecutive month, maintaining the highest rate in 17 years. Compared to the corresponding period of 2022, inflation increased by 5.4% from 16.82% recorded in April 2022.
On a month-on-month basis, the All-Items Index in April 2023 was 1.91%, which was 0.05% points higher than the rate recorded in March 2023 (1.86%). This means that in April 2023, on average, the general price level was 0.05% higher relative to March 2023.
Nigeria’s inflation rate continues its uptrend despite multiple interest rate hikes by the central bank to tame the rising rate. The CBN has increased Monetary Policy Rate (MPR) from 11.5% to 18% between May last year and March 2023.
